AUD/USD: Trading Australian Trade Balance

Australian  Trade Balance  is closely linked to currency demand and is a key indicator. A reading which is higher than expected is bullish for the Australian dollar.

Here are all the details, and 5 possible outcomes for AUD/USD.

Published on Thursday at 00:30 GMT.

Indicator Background

Australian  Trade Balance measures the difference in the value of imported and exported goods on a monthly basis. An unexpected reading can  have a significant  impact on  the movement of AUD/USD.

In July, the trade  deficit narrowed to A$2.41 billion, compared to A$3.20 billion a month earlier. This easily beat the estimate of A$2.65 billion. The deficit is expected to continue to drop, with an estimate of A$2.32 billion.

Sentiments and levels

The Fed didn’t raise rates in September but its stance is hawkish regarding a rate hike in December, and the markets have currently priced in a December hike at about 50/50. The RBA has downplayed any expectations of a rate hike, so monetary divergence will continue to favor the greenback.  So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 0.7938, 0.7835, 0.7692, 0.7597, 0.7513 and  0.7427.

5 Scenarios

1. Within expectations: A$-2.40 billion  to A$-2.25 billion. In such a scenario, the AUD/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations:  A$-2.41 billion  to A$-2.49 billion: An unexpected higher reading can send  the pair below one support line.
3. Well above expectations: Above A$-2.49 billion: The chances of such a scenario are low. Such an outcome could send AUD/USD downwards and a second support line might be broken as a result.
4. Below expectations: A$-2.24 billion to A$-2.17 billion: A smaller decline than expected could push the pair above one resistance line.
5. Well below expectations:  Below A$-2.17 billion. In this scenario, AUD/USD could break  below a second resistance line.

For more on AUD/USD, see the Australian dollar forecast.

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